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The Rally-Real Or A Squeeze Play?

Jordan Kotick, Global Head of Technical Strategy at Barclays Capital is a weekly regular that appears on Closing Bell w/Maria Bartiromo.

Maria asked Mr. Kotick to read into Wednesday's rally and see if there’s any evidence that this is solid and not just a short squeeze?

Kotick Tick By Tick
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Kotick Tick By Tick

Kotick: What we need to see if this is really going to go to the top and the summer squeeze is over, breadth has to contribute. So let's look at the advance-decline line here on the stock market.

You can see very clearly here big levels in the breadth market that has to go to the topside.

What you saw recently is the breadth lagged here and the market turned down, breadth

turned down, and what we're seeing is that the breadth is starting to bottom out here.

What we need to see is a breakout in the breadth. Volume is seasonally adjusted. It's kind of quiet in the Summer. If breadth can start to kick in, if it can start to continue this is a bull market to get on board. Be cautious here, it's not time to jump on have an answer within a week to ten days.

MARIA: What you're saying is you don’t have any evidence in terms of breadth right now that this rally is for real and long-standing?

Kotick: No. And if this is the real next leg higher, and we are bullish equities despite the summer move, we would expect breadth and volume to start to kick in. It's too early yet, we're seeing it improve but we're not breaking out. So there's room to get on board, we just don't have enough evidence to say the summer squeeze is done.

Advance Decline for NYSE
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Advance Decline for NYSE

What do the charts say? Right now we are seeing a period of low volume. We always do during the Summer. BUT the most important thing right now is breadth. Breadth has to break out. We have to see participation in the market. Don't have it yet.

Bottom line: Watch for it over next 1-2 weeks to confirm the move.

S&P and Shanghai Composite
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S&P and Shanghai Composite

China bottomed in Q4. Now it keeps going higher. China essentially led the recovery.

Bottom line: Need to see China continue its leadership for global equities to go higher.

Dec. ICE ECX EUA Futures
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Dec. ICE ECX EUA Futures

What do the charts say? This is carbon futures in Europe. Companies use during increased demand. This market tends to turn 1-2 months before European equities.

Bottom line: Want to see break to the top side.

USDCHF Volatility
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USDCHF Volatility

What do the charts say? What do you do with your money right now? Volatility diminishes in the summer months in foreign exchange. Volatility is its own asset class. Looking for it to continue lower.

Bottom line: Sell volatility, think its going lower.

Tune in every Wednesday to Kotick’s Tick-By-Tick With Maria Bartiromo for the latest in market psychology. Email us your questions at investoragenda@cnbc.com.

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Questions? Comments? Write toinvestoragenda@cnbc.com

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